PBoC releases financial policy guidelines for Shanghai FTZ

~~BEIJING – China’s central bank has posted suggested policy guidelines for Shanghai’s Free Trade Zone (FTZ), flagged in the Third Plenum blueprint for structural reforms. The policy guidelines cover capital account liberalisation, interest rate liberalisation and foreign exchange management within the FTZ.

The guidelines are lacking in detail and time table, and call for further consultation with other regulatory bodies, but nevertheless underscore the authorities’ intention to use the FTZ as a testing ground for broader national reforms. As anticipated, capital controls are expected to remain firmly in place between the FTZ and the domestic market.
BBVA Bank says a preliminary reading of the guidelines infers that individuals employed within the FTZ (including foreign nationals) will be permitted to invest in domestic and overseas markets, and that financial institutions in the zone will be able to invest in Shanghai's securities and options markets, issue bonds in the domestic market, and borrow from international markets.
The guidelines also pledge to streamline cross-border RMB transactions associated with current account transactions and FDI, and to loosen foreign exchange management and FDI regulations. In regards to interest rate liberalisation, financial institutions in the zone will be permitted to issue certificates of deposits at market-determined interest rates. www.bbvaresearch.com (ATI).